Question

All that blooms provides environmentally friendly lawn services for homeowners. its operating costs are as follows. depreciation $ 1,500 per month advertising $ 2,671 per month insurance $ 1,700 per month weed and feed materials $ 16 per lawn direct labor $ 13 per lawn fuel $ 3 per lawn all that blooms charges $ 89 per treatment for the average single-family lawn. collapse question part (a) determine the company's break-even point in number of lawns serviced per month.

Answer 1

To get the break-even point, the Total Cost must equal to the Total Revenue or Profit. The Total Cost is the sum of Fixed Costs and Incremental Costs. Fixed costs are depreciation, advertising and insurance which is equal to $5,871 per month. Incremental Costs are weed and feed materials, direct labor, and fuel which is equal to $32 per lawn. The Marginal Revenue is equal to $89 per lawn. Letting “N” to be the break-even point in number of lawns, the break-even equation becomes: $5,871 + $32N = $89N. Then calculating N, the break-even number of lawns is equal to 103.